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LAHORE: The Constructors Association of Pakistan (CAP) has called upon the government to award public sector contractors a one-time escalation for ongoing projects and revisit the escalation formula for saving the constructors from the additional burden they are bearing due to unbearable increase in the prices of construction material registered during the last one and half year.

“We are unable to meet the deadlines for already signed agreements in public sector while not participating in any new tenders for the last two months,” said CAP Chairman Engr Kamal Nasir Khan while talking to a select group of journalists here on Wednesday.

Prices of steel, cement, bricks and other construction material has registered an average increase of around 70 percent in the prices during the last one and half year while escalation in the public sector project in provinces does not exist while it provides only a 10-15 percent upward revision in the federal projects, thus constructors have to bear the additional expense of 60 percent at their own, he added.

Escalation in the prices of construction material impact both the developers and contractors of government projects but developers can add the increased prices to their end cost for private buying but contractors in the public sector has to follow the agreed prices. Escalation is not given in the provincial contractors at all due to which the industry is fast heading towards complete destruction. Some 80 percent of the constructors in public sector development projects are small constructors and they are unable to continue the work or participate in new bidding but if immediate relief is not given work on ongoing projects worth trillion of rupees would also soon come to a halt, said CAP Chairman Engr Kamal Nasir Khan.

He said steel prices have reached Rs 188,000 per tons from 104,000 per tons in March 2020, cement prices touched Rs 710 per bag from Rs 480 per bag, Bitumen from Rs 64,700 per tonnes to Rs 119,130 per tons, aluminum doors/windows from Rs 475 per square feet to Rs 825 per square feet and other materials also increased with the same ratio.

He said abnormal increase in fuel and energy prices, abnormal rise in exchange rate and increase in sea freights are the factors contributing to increased cost of construction

“80 percent of the small contractors do not even have working capital while big constructors can complete the projects even in loss by borrowing from the banks or selling their assets to save their reputation but small contractors involved in construction of streets, small roads and etc do not have that capacity,” he added.

Engr Kamal Nasir Khan said they were running from the pillar to post for the last one and half years to have upward revision in the prices in correspondence with the existing rate of construction material.

He claimed that a onetime escalation was given to the constructors in year 2004 by the then Musharraf regime vide SRO#26/(183) Plan Cord-II/PC/2004 and earlier in year 1974.

He said the planning commissioner, finance ministry and Pakistan Engineering Council (PEC) representative should sit together to carve out some formula for one time escalation payment to constructors besides revising the existing escalation formula to reflect present market dynamics where already escalation is provided.

Constructors Association of Pakistan (CAP) Chairman Engr Kamal Nasir Khan claimed that stoppage of ongoing construction projects and boycott of new tender would cause a direct impact of Rs 100-120 billion to the government while industries allied with construction would also face a slowdown causing further dent on the national exchequer.

Copyright Business Recorder, 2022

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